Forecasting Europe 2022 - How will the EU affect the Netherlands in 2022? ARTICLE - Berenschot
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ARTICLE Forecasting Europe 2022 How will the EU affect the Netherlands in 2022? 4 February 2022
Forecasting Europe 2022 | Article
Index
The position of the Netherlands in the European Pandemonium ........................................................................................................4
Our digital future: New legislation and regulations taking shape ......................................................................................................... 6
European Year of Rail strengthens opportunities for accelerated development of cross-border rail links ........... 9
‘Fit for 55’: Impact of (possible) changes to EU-ETS and CBAM decision-making .....................................................................11
The role of Central Audit Institutions in the transition to sustainability: the European Court of Auditors ........... 14
NATO & transatlantic innovation: upcoming opportunities for Dutch SMEs ............................................................................... 16
Experts................................................................................................................................................................................................................................................... 18
Authors.................................................................................................................................................................................................................................................. 18
2Forecasting Europe 2022 | Article
Introduction
The past year was a turbulent one for Europe. The EU faced challenges from inside
and outside its borders. The corona virus pandemic obliged Member States to reach
agreements on a recovery package, some European states weakened Europe’s
foundations by undermining the Rule of Law, and the era of Angela Merkel came to a
close after 16 years. On top of that, there were growing concerns about the situation
on the EU’s eastern borders due to both the influx of immigrants from Belarus and
Turkey and the threat of looming conflict between Russia and the Ukraine. In short,
many reasons to ask experts at the heart of European affairs what all of this means for
Europe’s position and how developments might impact the Netherlands in future.
Article overview
Alongside the political issues taking centre stage in Europe,
Berenschot also sees interesting policy and other developments The position of the Netherlands in the
Luuk van Middelaar
emerging behind the scenes which we expect to move into European Pandemonium
the spotlight in 2022 at both European and national level. Marieke van Putten,
Our digital future: New legislation and
For instance, the idea of a European army as an alternative to Nicky Tanke,
regulations taking shape
Emma Bree
Europe as simply a soft power. The EU is preparing legislation
European Year of Rail strengthens
to regulate and/or reduce the monopoly position of Big Tech
opportunities for accelerated Wim van de Camp
multinational corporations. At the same time, the European development of cross-border rail links
agenda is increasingly dictated by the idea of a more sustainable ‘Fit for 55’: Effect on (potentially)
EU and how to achieve the climate ambitions set out in the EU intensify EU-ETS and decision-making Leon de Graaf
on CBAM
Green Deal1. For instance, the debates and possible decision-
The role of Central Audit Institutions
making on elements of the ‘Fit for 55’ package. in the transition to sustainability: the Eva Lindström
European Court of Auditors
For the Netherlands 2021 was dominated by the longest NATO & transatlantic innovation:
upcoming opportunities for Dutch David van Weel
coalition formation in its history. Now that the coalition
SMEs
agreement is signed and sealed, the government is gearing up
to tackle the challenges. For instance, increasing the defence
budget, and intensifying their efforts on themes such as In this publication, the Berenschot EU-team, led by Robert
poverty, digitalisation and climate. The coalition agreement Wester, addresses six key European developments and consider
also sends a clear message on Europe: ‘Many of the challenges their likely impact on the Netherlands. We trust that these
we face require a European or even a global approach. That articles will give you a clear picture of the European themes
is why the Netherlands intends to play a leading role in influencing the Netherlands.
promoting a strong and effective European Union. .’ 2
1 https://ec.europa.eu/info/sites/default/files/
european-green-deal-communication_en.pdf
2 https://www.parlement.com/9291000/d/pdfs/coalitieakkoord-2021-2025.pdf
3Forecasting Europe 2022 | Article
The position of the
Netherlands in the
European Pandemonium
In line with the hybrid ways of working that the corona And that at a time when, just after the start of the covid outbreak,
pandemic has introduced, we held our interview with Luuk some people were saying that Europe’s days were numbered.’
van Middelaar via a Zoom link between Brussels and Utrecht. According to Mr van Middelaar, a crisis helps us to see existing
After several intensive years at the heart of policymaking in political relationships in a different light, and the corona
Brussels, Mr van Middelaar is now spending more time on pandemic has certainly revealed some previously hidden
writing, specifically columns focusing on European issues weaknesses on the world stage. At the start of the pandemic,
for NRC Handelsblad and books, including his most recent a sense of Chinese hegemony and of America turning inwards
publication, ‘Een Europees Pandemonium’. Meanwhile he is also were all too evident, and this geopolitical situation has forced
Professor of Foundations and Practice of the European Union Europe to redefine its position in the world. One of the positive
at Leiden University. During the interview we took a brief look aspects of the pandemic is that the crisis has also created new
back at the past year to find out what Europe can expect on political momentum, with Europe now displaying greater unity
a geopolitical level in 2022, as well as discussing the possible on the global stage.
implications of the change in the German chancellorship and
the rising tensions between East and West. Does EU unity really exist?
Zooming in further on the question of unity within the EU,
Mr van Middelaar clearly regards some developments as
“The EU became stronger even at a time when concerning. These include the potential threats to the rule
it had to set aside some of its ideals by closing of law that we can see in certain European member states,
internal borders.” specifically Poland and Hungary. Allowing these member states
to slide into autocracy would mean the EU becoming detached
from its core democratic values. And this could happen quickly,
What should we learn from the pandemic? given that Hungary is due to hold elections in 2022, followed
As Mr van Middelaar sees it, the EU can certainly learn some by Poland a year later. ‘This points to a challenging time ahead
lessons from the start of the pandemic. ‘The EU took some major for Eastern Europe. But the other European countries can help by
decisions in a relatively short space of time: between spring and expressing moral support for democratic parties in those countries
summer 2020 it responded to the corona pandemic by setting up or maybe even suspending bilateral trade treaties. The risk is that
the EUR 750 billion recovery fund. This was despite the criticism the complex debate on the precedence of EU law will play right
expressed by Wopke Hoekstra, the Dutch Finance Minister, which into the Polish and Hungarian governments’ hands by deflecting
Southern Europe saw as less than empathetic. The EU became attention away from the real issues and letting these governments
stronger even at a time when it had to set aside some of its ideals present themselves as defenders of national sovereignty. But in the
by closing internal borders. And in the midst of the pandemic end, it’s not Brussels, Berlin or The Hague that’s going to save the
it demonstrated resilience, admittedly with some hiccups and rule of law. The only people who can do that are the Hungarian
challenges along the way, by calling on member states to show and Polish voters, at the ballot box.’
solidarity.
4Forecasting Europe 2022 | Article
Another European development causing him concern, and that What about Dutch policy on Europe in 2022?
could potentially prove more problematic, is the crisis on the Given the geopolitical and economic developments outlined,
border between Lithuania and Belarus. ‘The situation on the what should Dutch EU policy be focusing on over the coming
Belarus border shows that the EU’s external borders are vulnerable year? In Mr van Middelaar’s view, the Netherlands needs to
because it’s all too easy for a dictator to promote human trafficking become more pro-active and to cling less desperately to the
on a large scale as a way of conducting a hybrid war.’ Although status quo if it is to find a healthy balance between Dutch and
the diplomatic and economic sanctions announced by the EU European interests, including their mutual interest in an open
are expected to calm this situation for a while, the problem is economy. ‘The world’s changing. Just look at all the Chinese take-
not going to go away. As soon as such a situation re-arises, we overs we’re seeing in Europe and also the growing pressure that the
will get another European debate on asylum and migration, United States is putting on European high-tech manufacturers not
but this time it will also have to consider how to protect our to export to China. The EU countries need to work out a response,
external borders. ‘This type of politics just wasn’t part of the maybe in the shape of an industrial policy. And that’ll also mean a
equation when the EU was being established, but in the long run it change of course for the Netherlands in, say, its position on state
can have a huge impact on European policy.’ aid, or being less naive in its trade policy.’ As he sees it, the Dutch
government will also have to make more effort to build public
support for the EU. ‘Over the next few years we really need to see
“Over the next few years we really need to a move towards highlighting how vital EU membership is for the
see a move towards highlighting how vital EU Netherlands. Being part of an economic community and a commu-
membership is for the Netherlands. Being part nity of shared values makes us so much stronger than we would
of an economic community and a community otherwise be and means we’re part of a greater whole. This change
of shared values makes us so much stronger isn’t going to happen within a year or even within a single legis-
than we would otherwise be and means we’re lative period, but the ball does need to start rolling.’ The Nether-
part of a greater whole.” lands would be well advised, in his view, to take a good look at
Germany, where the government clearly sees investing Europe-
an money in German projects as a good way of stimulating the
But as well as various worrying developments in and around domestic economy. ‘That’s something that’s still totally incon-
Europe, Mr van Middelaar was keen to emphasise some positive ceivable in the Netherlands right now. Even Volt and D66 hardly
developments. dare suggest it. So it’s really important over the next few years for
the Dutch government to have the courage to come out and tell the
The recent German elections, for example, have shown that European story to the general public. Only by working together to
we can expect a degree of continuity at the heart of that counter the threats that we in the continent of Europe are exposed
country’s politics over the next few years. Germany’s political to can we protect and maintain our prosperity and way of life.’
foundations will largely stay the same because all the major
parties agree that for Germany to prosper, the European Union, Any questions?
too, needs to do well. As he sees it, the ‘traffic light coalition’ is Please contact Robert Wester via r.wester@berenschot.nl if you
certainly going to mean some changes in emphasis: ‘Germany’s have any questions about this article.
going to be greener and to upgrade its digital infrastructure, and
there’s also going to be more financial solidarity in the country.
But the big question at a European level is how quickly Chancellor
Scholz will be able to fill the leadership vacuum that’ll be left by
Angela Merkel’s departure.’
5Forecasting Europe 2022 | Article
Our digital future:
New legislation and
regulations taking shape
Our digital future is being shaped by technological, economic The coalition described itself in 2021 as ‘collaborating in four
and social developments that are following each other in rapid areas: human-centric use of artificial intelligence, cross-border
succession. It is very important, therefore, for governments digital services, digital identity and open source’ and has
and society to understand the potential implications of these announced that these topics will be reviewed in 2022.
developments, to prepare themselves for the future and, where
necessary and possible, to steer the direction they take. But while Marieke van Putten and Nicky Tanke, policy officers at the
new technologies are creating opportunities to change and im- Dutch Ministry of the Interior and Kingdom Relations, and
prove on existing practices in various ways, this does not mean Emma Bree from the Dutch Data Protection Authority discuss
they will automatically determine every aspect of our future. As a the most significant developments in EU legislation and
society we also have choices: we can embrace or reject technology regulations that they are currently working on.
and, most importantly, we can choose how we use it and wheth-
er we impose restrictions, and we can also play a role in shaping Making life, work and business in the EU easier
it. Sometimes technological design dictates certain forms of use, The Dutch government is seeking to use the opportunities
without society having given any conscious thought to these uses being created by the digital transformation to make life easier
or having made any choices. Governments are trying to antic- for citizens and businesses alike. The eGovernment Action Plan
ipate and respond to these developments by issuing legislation contains measures designed to optimise life, work and doing
and regulations at both an EU and a national level. In this article business in the EU, including helping EU citizens to digitally
we examine developments in EU legislation and regulations that access various government services in other Member States.
will impact on the Netherlands.
These measures include the Single Digital Gateway (SDG)
As well as responding to legislation and regulations, the Regulation, which should make accessing government services
Dutch government is experimenting with innovation in a easier for EU citizens and businesses wanting to live, work,
European context in a ‘coalition of the willing’. Former Dutch study or do business in other Member States. Not everyone
State Secretary Raymond Knops, Dutch State Secretary for in the EU can currently access digital services equally easily.
the Interior and Kingdom Relations, has brought together And that’s what the European Commission’s SDG Regulation
eight leading European countries in the digital arena – the is seeking to improve by creating a single, user-friendly
Netherlands, Belgium, Denmark, Estonia, Finland, France, and integrated portal for access to online information
Germany and Portugal – to create an informal, high-level and administrative procedures, along with the appropriate
alliance for exchanging knowledge and conducting co- assistance and problem-solving services, in the various
experiments designed to underpin Europe’s digital agenda. Member States. This regulation is based on three pillars: (1)
Policymakers collaborating in this coalition aim to learn from Information, (2) Procedures and the ‘Once-Only’ Principle,
each other on digitalising public services and to come up and (3) Help and Support Services.
with concrete solutions for various digital challenges facing
governments, with a focus on the issues of most importance
for digitally transforming these services.
6Forecasting Europe 2022 | Article
Various deadlines have been set for the regulation: by Ahead of European legislation and regulations in this field,
December 2020 EU citizens must be able to find the most Berenschot is now working with certain Dutch municipalities,
relevant information on central government services and the including Amsterdam and Rotterdam, to develop a governance
related e-procedures via the Your Europe portal, while by the model for responsibly applying algorithms. The municipalities’
end of 2022 the relevant information on other government decision to anticipate these developments, and specifically their
services and the related e-procedures must also be accessible. devising of a governance model, is sensible as government
By the end of 2023, all relevant procedures must be able to be authorities are going to have to deal with this issue in the near
found via the portal and, if applicable, completed digitally. This future, and maybe as early as 2022.
will be in accordance with the ‘Once-Only’ Principle (‘OOP’),
with citizens and businesses then able to authorise Member The final legislative development of importance in this respect
State governments to digitally exchange relevant documents is the Digital Government Act [WDO], which will take effect
for certain procedures and so avoid unnecessary duplication. in mid-2022. This legislation aims to provide a secure and
Documents will be exchanged via a Once-Only Technical reliable way for citizens and businesses in the Netherlands to
System (‘OOTS’), which still has to be built. Preparations for log in to government and semi-government services. Rather
implementing this regulation are currently underway and will than detailed rules, it sets out a series of general principles,
involve quite some work for Dutch government organisations responsibilities and procedures that should allow a flexible
over the coming year. response to new developments, while also assuring citizens that
important issues such as user-friendliness, reliability, security,
Data and system security privacy and digital inclusion will continue to be properly
Data shared in this way must be secure. This is the reason for safeguarded.
introducing the Data Governance Act (DGA), a European
Commission regulation that sets out to create a framework Accessibility and transparency in government
to make data-sharing easier, and in which the rules on re- services
using government information play an important role for Another forthcoming development is the introduction of the
decentralised authorities. This regulation will come into force DUTO (Long-Term Accessibility) standards. These standards,
in late 2022. which are designed to ensure that information in government
systems remains sustainably accessible, are of a generic
nature and reflect what users expect in terms of accessible
Although new technological developments information. Their introduction is a way for government
in the field of artificial intelligence (AI), for organisations to meet their obligation to set verifiable
instance, are creating opportunities for requirements for information that is to be permanently
innovation and greater efficiency, they also preserved. Although applying the DUTO standards is not
involve risks from a privacy and ethical mandatory, it is strongly recommended.
perspective.
It is vital for government bodies to maintain an inventory of all
DUTO registrations (both digital and paper registrations) so as
Although new technological developments in the field to assess whether this information has to be made available for
of artificial intelligence (AI), for instance, are creating publication under the proposed Open Government Act [Wet
opportunities for innovation and greater efficiency, they Open Overheid/Woo]. The latter is a private member’s bill that,
also involve risks from a privacy and ethical perspective. The if adopted, will replace the Government Information (Public
European Commission is trying to counter these risks by setting Access) Act [Wet openbaarheid van bestuur/WOB]. The main
rules on the use of AI. An example of this can be seen in the EU difference between the bill and the existing legislation relates to
Strategic Framework on AI, in which the Commission has laid information actively required to be published; as far as passive
down rules intended to ensure that AI systems used in the EU are publication (i.e. publication upon request) is concerned, the
secure, transparent, ethical, unbiased and under human control. provisions in the bill are largely identical to those in the WOB.
To achieve this objective, the relevant systems have been assigned Assuming the bill is approved, the new legislation is likely
to risk categories, with additional rules applying to systems in to come into force in 2022, with more and more types of
the highest risk category. government information actively being required to be published
in the years to come.
7Forecasting Europe 2022 | Article
You can find more details on all the latest developments in this The European Commission has published two legislative
respect on: www.berenschot.nl/webinar-woo. initiatives – the above-mentioned Digital Services Act (DSA)
and the Digital Markets Act (DMA) – to improve the rules
Lastly we should mention the Modernisation of Electronic applying to digital services in the EU. Together, these Acts form
Administrative Traffic Act [Wet modernisering elektronisch a single new set of rules applying throughout the EU. These
bestuurlijk verkeer/WMEBV], which will come into force in rules are designed to create a more secure and more open
2022. Under this legislation, citizens will be able to send digital space and to encourage innovation by establishing a
electronic communications to administrative entities in a level playing field, as well as protecting the basic rights of all
manner specified by the latter. These entities will all have to digital service users. The aim is to reach final agreement on this
establish whether they need to take steps to comply with the legal framework during 2022, and for the DMA and DSA then
legislation and then start preparing and implementing any to quickly come into effect across Europe.
measures required.
Initiatives
Advantages and disadvantages of online platforms We have recently seen various initiatives of interest from an
By boosting innovation, online platforms have generated innovation perspective, including the proposal by the IPO and
benefits for consumers and so helped to make the EU internal VNG to set up a Dutch societal innovation hub for facilitating
market more efficient, while also making cross-border trade knowledge transfer and sharing between smaller businesses and
both within and outside the EU easier. This has created governments.
new and easier opportunities for a wide range of European
businesses and traders wanting to expand and to access new Any questions?
markets. Please contact Frederik Gevers Deynoot via f.geversdeynoot@
berenschot.nl if you have any questions about this article.
But although there is broad consensus on the benefits of this
transformation, the problems associated with it have major
implications for society and the economy. A key problem in
this respect relates to the online trade in and exchange of illegal
goods, services and content. Online services are being abused
by manipulative algorithmic systems to increase the spread of
disinformation, as well as for other harmful purposes. These
new challenges and the ways platforms are dealing with them
are having a considerable impact on basic rights online. A
few huge platforms currently control major ecosystems in the
digital economy, where it is their rules that apply. These rules
can impose unfair conditions on businesses using the platforms
and ultimately reduce consumer choice. The Dutch government
has also recommended that the EU should specifically target
Airbnb in its new Digital Services Act so as to better manage
the side effects this particular platform is having on the short-
term rental market.
8Forecasting Europe 2022 | Article
European Year of Rail
strengthens opportunities
for accelerated development
of cross-border rail links
Under the banner of the European Year of Rail (EYR), the Even where there have been specific improvement efforts, it is
European rail industry prepared for a year in which the train difficult to pinpoint clear successes. Short-term results linked
could present itself as “the most sustainable, innovative and to the EYR appear to be related mainly to stepping up existing
safe” means of transport. An ideal opportunity to rapidly give initiatives. Examples of which include cooperation between
shape to the ambition of the European Commission and the European infrastructure managers to create better framework
member states to improve national and international rail links, conditions for high-speed international rail links. It is also
also in view of the issue of climate change. likely that the traction created by the EYR programme has had
The EYR will come to an end this spring. In this article we an impact on the development of specific proposals by the
consider what results have been achieved so far and how the group of EU member states3 that have committed to improving
new European rail policy could contribute to achieving the international rail transport.
Netherlands’ international rail ambitions.
Fertile basis created for some short-term
Immediate results limited so far improvements
In addition to the growing political and public interest in In our paper ‘Naar een European Year of Rail met impact’
sustainability and the climate, the EYR has helped to increase [Towards a European Year of Rail with impact]4 at the end
the popularity of rail travel. It should be noted in this context, of 2020, we presented three themes which needed attention.
however, that this result seems to have been achieved mainly Recent discussions with key players in the rail sector, including
among politicians and policymakers and to a lesser extent Wim van de Camp, the Netherlands’ Ambassador for the EYR,
among the general public. In the Netherlands, apart from have made it clear that all three of these topics are still very
posters in stations and ‘the climate train to Glasgow’, the EYR relevant. Stakeholders report that little action has been taken
seems hardly to have caught the headlines. concerning our suggestions on stepping up the harmonisation
of systems to promote regional cross-border rail links. From
the perspective of both customer convenience and reducing
“Decisiveness and implementation are now the operating costs of carriers and commissioning clients,
necessary, which is why the Netherlands must there is still much to be done. However, this often involves
ensure that at least two of the 15 announced large investment sums with long lead times and the EYR has
European pilots for cross-border trains focus on not been able to make much of a difference there. Although
routes to the Netherlands.” the outlook for the other two themes: improving the air-rail
connections on offer and international ticketing, does appear
to have improved.
3 The International Rail Passengers Platform.
4 Berenschot, 2020.
9Forecasting Europe 2022 | Article
“Decisiveness and implementation are now This means that the European Commission and individual
necessary, which is why the Netherlands must member states will have to continue to be involved in this for
ensure that at least two of the 15 announced the foreseeable future. Not just in continuing to emphasise its
European pilots for cross-border trains focus on urgency, but also in creating the right conditions.
routes to the Netherlands.”
The new European rail policy offers the
Netherlands opportunities for real improvements
Exporting the air-rail approach The European Commission sees a key role for the transport
The Netherlands was one of the first European member states sector in achieving its climate goals. Major changes in
to develop an Action Agenda5 on initiatives aimed at replacing European rail policy have been made to enable rail transport
air travel (or part of a journey) by rail travel. Since then several to make a significant contribution to this. For example, using
member states have imposed restrictions on internal flights, regulations and resources more actively as instruments to
mainly on routes where there is a good rail alternative. The create a European network of high- speed train links7. Besides
approach adopted in the Netherlands, in which the Ministry this, an Action Package of measures has been drawn up to
of Infrastructure and Water Management and representatives improve international connections and, in this context, 15
of both the rail and aviation sectors together drew up a dedicated pilots have been launched.
comprehensive vision and plan, has so far not been seen
anywhere else in Europe. This is also partly why there are few, if During the EYR, together with other member states, the
any, examples of new cross-border air-rail initiatives. Netherlands has shown considerable ambition in terms of
international rail links. The policy framework and resources
Over the past year modest progress has been made in the Dutch now made available by the European Commission will also
context on the improvements identified in the Action Agenda make it possible for suitable long-term improvements to be
which will provide better and more dependable connections made in the next few years. For example, further to several
between air and rail transport. There is a fertile basis not only years of research, it is now clear that investment decisions
to accelerate implementation in the Netherlands, but also to should be taken in line with the aim of significantly speeding
export the concept to other European member states. Only in up and improving the rail links with Germany. Where there are
this way will this initiative have an impact across Europe. longer lead times for infrastructure to be built, the pilots offer
opportunities for improvements in the short term.
Speeding up improvements in international ticketing
During the EYR the call to more rapidly improve customer The Netherlands is the starting point and end point of many
convenience in buying a ticket for international rail travel European transport corridors. Combined with its expressed
has become increasingly stronger. The ability to find fares and intentions for international passenger transport, it is only
tickets, as well as to book well in advance, needs to be improved natural that the Netherlands should subscribe to several pilots.
to meet travellers’ expectations in this context. The cooperating
European railway companies, united in the CER6, have taken During the European Year of Rail it has become clear that
up this gauntlet. Where positions and interests have long stood the European Commission is embracing rail transport more
in the way of making real improvements, the CER’s plans now firmly than ever before. Interaction at European, national and
show considerable ambition. It is open to question, however, regional or local levels remains as necessary as ever to achieve
whether they go far enough and will be fast enough. results. A number of the improvements discussed above will
require the active involvement of central government. Apart
Growing interest in the subject of ticketing, also on the part of from this, there are great opportunities for local and regional
the European Commission, has spurred the parties into action. authorities to speed up the development of their international
The ambition stated in the framework of the EU Green Deal of rail travel ambitions, in line with the European priorities.
doubling the number of cross-border rail travellers in Europe by
2030 calls for rapid action. Unconventional partnerships will Any questions?
probably also be required to find solutions. Please contact Tim Geraedts via t.geraedts@berenschot.nl if you
have any questions about this article.
5 Action Agenda for train and air travel, Berenschot 2020.
6 Community of European Railways 7 Revision of the TEN-T policy and its associated CEF funding instrument.
10Forecasting Europe 2022 | Article
‘Fit for 55’: Impact of
(possible) changes to
EU-ETS and CBAM
decision-making
The Netherlands signed the Paris Climate Agreement in 2015 Leon is very positive about this proposal: “The EU wants to
and committed to help limit the increase in global average achieve climate neutrality by 2050 at the latest. Some sectors are
temperatures to 1.5-2 C compared to pre-industrial levels.
o
unlikely to reach that goal on time, for instance agriculture. Which
For the energy transition to succeed (in the Netherlands, the means that other sectors will have to make even greater efforts.”
EU and beyond), many choices need to be made in 2022. Two A 4.2% linear reduction factor will probably mean that the
important topics in the European debate on the European total cap (i.e number of new CO2 permits entering the EU ETS
Green Deal in the coming year are: Strengthening the EU system) will reach zero by around 2040 (give or take a few
Emissions Trading System (EU ETS) and the introduction of a years). That, in turn, means that industry and power utilities
CO2 price for imports at the EU border, known as the Carbon will no longer be allowed to emit greenhouse gas emissions,
Border Adjustment Mechanism (CBAM). To find out exactly or that they will have to use carbon emissions allowances
what’s at stake and what this could mean for the Netherlands, they saved up in the past or find some way to achieve negative
we posed three questions to Leon de Graaf, senior expert emissions elsewhere to compensate their own emissions.
on European climate policy at #SustainablePublicAffairs, a Leon supports this proposal and points out that the European
Brussels-based public affairs agency that supports sustainable Parliament’s rapporteur on this issue, Mr. Pieter Liese, has not
frontrunners in the energy transition. submitted any amendments to the proposed tightening of the
linear reduction factor.8
Last year the European Commission presented its Fit for 55
package to Europe. One proposal is to strengthen the EU ETS. Other topics are more hotly-debated. One discussion is centred
The plans still need to be approved by EU member states and the around the free CO2 allowances going to businesses. A signif-
European Parliament. icant proportion of the allowances in the EU ETS system are
given for free to companies to prevent carbon leakage effects9.
What exactly will change?
The European Commission presented its policy proposal on
8 The rapporteur is, however, asking for an overhaul of the benchmarking
strengthening the EU ETS and on CBAM in July 2021. The system. Under this benchmarking system each industry sector is allocated
free allowances based on the average of the 10% most efficient installations.
European Parliament and the European Council are currently The problem with this system is that most benchmarks are based on very old
production processes: For instance, the hydrogen benchmark only describes
hydrogen produced from fossil fuels. As soon as a business moves to cleaner
working to define their views on these proposals. Regarding the production processes, for instance the use of fossil-free hydrogen, it could
be out of scope of the benchmark and excluded from free allowances. All of
EU ETS reform, one key proposal by the European Commission which hampers the transition to carbon-neutral processes. While the European
Commission does want to make changes to this system, they are unlikely to
is to reduce the total number of CO2 allowances in circulation materialize before 2030. The European Parliament rapporteur wants the reforms
to be introduced in the next few years so that the new benchmarks can take
by 4.2 percent per year (double the current annual rate of 2.1 effect from 2026. Several of the sustainable frontrunners Leon works with
support this quicker revision, because they have been unhappy with the old
percent). This is known as the linear reduction factor. system for many years. New benchmarks will stimulate green innovations.
9 Carbon leakage is the potential risk that companies move production from
Europe to other countries because of the higher costs associated with more
ambitious European climate policies, which could put them at a competitive
disadvantage compared to non-EU companies
11Forecasting Europe 2022 | Article
The idea is that these free allowances will be phased out more What is CBAM and why is the European
rapidly for sectors that will be covered by the CBAM, otherwise Commission proposing to introduce this system?
there is double protection. But the pace of that phase out is In a nutshell, the CBAM puts a CO2 price on imports to ensure
fiercely debated. The European Commission proposes that the that European businesses are not put at a competitive disad-
accelerated phase-out of free allowances should start in 2026 vantage compared to those imports coming from companies
with a view to complete the phase-out by 2035. outside the EU. The aim of CBAM is two-fold: To complement
the EU ETS system as an effective way to decarbonise Europe’s
The largest political group in the European Parliament (EPP, industries and power sectors, and to incentivise governments
of which Mr Liese is a member and which includes members and companies in non-EU countries to do more.
from the Dutch Christian parties CDA and CU) supports this
approach. The second largest political group in the European What topics are still up for discussion?
Parliament is S&D, which includes members from the Dutch The Member of European Parliament with a key role on this
labour party (PVDA). Led by the Dutch MEP Mohammed issue is the Dutch MEP Mohammed Chahim. He has proposed
Chahim, S&D wants to see a more rapid change: They argue important ways to increase the ambition of the CBAM.10 First
that free allowances for CBAM sectors should end by 2028. of all, Mr Chahim wants more industrial sectors to be covered
The fact that the two groups have almost the same number by the CBAM. In the Commission’s proposal, CBAM will
of seats gives the European Parliament’s third-biggest party, initially cover the aluminium, cement, direct electricity, iron
Renew Europe (includes members from the Dutch liberals VVD and steel, and fertiliser sectors. Mr Chahim wants hydrogen,
and social democrats D66), a key role in the decision-making polymers and organic basic chemicals to be added to this list.
process. They are in a position to provide a majority for one of He also wants the CBAM to cover indirect CO2 emissions, such
the two sides. Leon thinks that the result may be a compromise as the emissions that were emitted during the generation of
solution: For instance, a full phase out of free CO2 allowances electricity that was used to produce an imported product. The
for CBAM sectors by 2030 at the latest. CBAM proposal by the Commission only refers to an imported
product’s direct CO2 emissions, which therefore in fact
And do you expect that a deal will be reached on excludes many emissions.
ETS and CBAM in 2022?
The expectation is that both issues will be finalised in 2022,
provided that the Parliament and Council make their position “It’s already clear that the Commission
on the Commission’s proposals known in the first six months of proposals on CBAM are encouraging non-EU
2022. This could well happen, because France holds the presi- countries to do more, for instance setting up
dency of the European Council for the first half of 2022. They their own ETS or other ways to increase their
have indicated that they want to push through decision-making, climate ambitions.”
at least on CBAM, during their presidency. Which, says Leon,
would be a good thing for ambition: Czechia will take over the
EU presidency in the second half of the year and their ambition Opponents of the proposal to include indirect CO2 emissions
level on both issues will likely be lower. If the Parliament and at this early stage argue that it is difficult to collect all the
Council provide their views in the first half of the year, trialogues necessary data on indirect emissions. But Leon believes that Mr
(i.e. discussions between the European Commission, Parliament Chahim’s proposal to include indirect emissions in the CBAM
and Council) will start in the second half of the year, and a final is highly needed. And, he explains, it can be achieved by mak-
deal could be reached by the end of 2022. ing importers or third country producers responsible for the
burden of proof, i.e. data collection on indirect CO2 emissions.
“A deal on strengthening the EU ETS and
CBAM will probably be made in 2022. Because
ETS and CBAM are so interconnected, a deal
will likely be reached on both simultaneously
or neither.”
10 https://www.europarl.europa.eu/doceo/document/ENVI-PR-697670_EN.pdf
12Forecasting Europe 2022 | Article
For those that are not willing to provide actual indirect CO2 Many companies in Europe are working on
data should be assigned a punitive default value for their innovations to reduce GHG emissions from
indirect emissions that is based, for instance, on the 10% production processes. Which innovations do you
worst performing industry or power installations in a country expect to have a major impact in the coming year?
or region. A CBAM charge on the indirect CO2 part would be How will they be felt in the Netherlands?
very high in this case, which would serve as a huge motivator Leon is very enthusiastic about the future role of fossil-free
for importers to provide their real indirect CO2 emission data, steel. Fossil-free manufacturing uses power generated by
because that could lower their CBAM charge. nuclear energy and/or renewable energy sources. In 2021, one
of the sustainable frontrunners that #SustainablePublicAffairs
And who will feel the impact of CBAM in the short- works with, the Swedish steel producer SSAB, showed that
term? small-scale production of fossil-free steel is already possible
Think tank E3G recently explored the likely impact of the
11
using a production process powered by fossil-free hydrogen.13
CBAM on other countries. They concluded that large countries This process replaces the current steelmaking method of
like China and the United States will feel only limited impacts reducing iron ore to iron in furnaces fuelled by cokes and coal.
from the European Commission’s proposal. Their study, which
was conducted last year, shows a limited impact on the US (net In conclusion, Leon highlights two important issues that merit
CBAM cost of EUR 10 million when it is introduced in 2026, attention: The role of blue hydrogen in the energy transi-
and up to EUR 25 million in 2035). For imports from China, tion, and the conditions related to possible subsidies for new
costs will rise but their competitive position will improve installations. The Dutch government’s climate efforts include
because the CBAM charge will be higher for imports from other both green and blue hydrogen (editor’s note: hydrogen made
countries. According to the report, Russia, Ukraine and Turkey from natural gas is labelled ‘blue’ when the carbon generated
will likely face the highest relative CBAM fees, due to the from the production process is captured and stored under-
types of products they sell to Europe and the major differences ground). Leon points out that blue hydrogen projects must be
between the EU’s climate policies and their own. However, the future-proof, because hydrogen production installations have
costs for Europe’s trading partners could rise more substantially a lifespan of 25-30 years (or well beyond 2040), and energy
if MEP Mohammed Chahim’s proposals on indirect emissions companies make a business case based on that estimate. If the
and additional sectors are adopted. The US, for example, Dutch government provides subsidies to blue hydrogen produc-
exports billions of euros worth of chemicals every year to the tion, but if it turns out that those projects might not be able to
Netherlands and the rest of Europe. Of course, countries could achieve climate neutrality, then those projects might have to be
reduce the level of CBAM costs they have to pay by taking taken offline prematurely and this creates stranded assets. This
action to make their own industries and power sector more is comparable to the European-wide phase-out of coal-fired
sustainable. In fact, we are already seeing a positive impact power plants. One such example is the Onyx coal-fired power
from CBAM in this respect. In anticipation of the plans for a plant in Rotterdam. Built in 2015, the plant was announced at
CBAM, Ukraine and Turkey have started working on their own the time as one of the most efficient in Europe.
ETS. Turkey’s chief climate envoy to COP26 recently indicated
that this ambition came about partly in response to pressure However, now that the Netherlands has intensified its climate
from the CBAM. 12
ambitions, the plant is scheduled for closure after only a few
years of operation and costing the Dutch taxpayers more than
Which is a good thing, since it means that the EU is already EUR 200 million to do so.14 It’s important that lessons are
partly achieving one of its CBAM ambitions, namely to learned from this experience and that we avoid making the
incentivise other countries to take more action. The first few same mistakes with blue hydrogen.
years of the CBAM (2023 – 2025) will be a test phase to gather
initial data. In that period, CBAM will not have any financial Any questions?
impacts. Please contact Joachim Schellekens via
j.schellekens@berenschot.nl if you have any questions
about this article.
11 https://www.e3g.org/news/new-study-shows-limited-trade-impacts-of-euro- 13 https://www.ssab.com/news/2021/10/
pean-carbon-border-adjustment-mechanism/ ssabs-fossilfree-steel-featured-in-volvo-groups-vehicle
12 https://www.politico.eu/article/ 14 https://www.reuters.com/markets/commodities/
eu-carbon-border-adjustment-mechanism-turkey-paris-accord-climate-change/ onyx-coal-fired-power-plant-shut-with-dutch-government-support-2021-11-30/
13Forecasting Europe 2022 | Article
The role of Central Audit
Institutions in the transition
to sustainability: the
European Court of Auditors
The transition to sustainability is not possible without excellent With sustainable development as a core principle of the Treaty
public institutions. This is recognised in the 17 Sustainable on European Union, it is no surprise that the EU has a leading
Development Goals (SDGs) adopted by all United National role as regards sustainability transitions on finance, post-Covid
member states in 2015. SDG 16 contains a concrete target recovery investments, mobility, energy, food, circular economy
(16.6) stating that institutions to support implementation and the protection of biodiversity. The EU’s executive, the
of the SDGs should be “effective, accountable and inclusive”. European Commission, has taken numerous legal and financial
Accountability is therefore one of the three pillars of initiatives to promote sustainable development through the
institutional quality. In 2018, the UN Economic and Social European Green Deal and the ambitious climate package.
Council endorsed the eleven so-called ‘CEPA principles of
effective governance for sustainable development’ 15. Three Against this backdrop, it is logical that the EU’s own
of them are directly linked to accountability: integrity of civil independent auditor, the European Court of Auditors (ECA), has
servants, transparency of public institutions, and independent adapted its work programme to focus more on sustainability.
oversight. The latter means that “To retain trust in government, ECA’s mission is, “to assess, through our independent,
oversight agencies are to act according to strictly professional professional and impactful audit work, the economy,
considerations and apart from and unaffected by others”. effectiveness, efficiency, legality and regularity of EU action to
improve accountability, transparency and financial management,
SDG 16 thus calls for national Supreme Audit Institutions and thereby to enhance citizens’ trust and respond effectively to
(SAIs) to play an essential role in the implementation of the current and future challenges facing the EU”.
SDGs. In many countries, they have since then stepped up
targeted audits on policies, legislation and public spending The ECA, based in Luxembourg, has around 900 staff of all EU
related to the 17 Goals. They work together at the global level nationalities and is managed by a College with one Member
in INTOSAI and at the European level in EUROSAI. from each EU Member State. One of the ECA Members most
involved in the accountability of sustainability initiatives is
Ms. Eva Lindström, the Swedish member of the ECA. Before
becoming ECA Member in March 2018, she was, among
others, budget director at the Swedish Ministry of Finance,
Swedish Auditor-General, and State Secretary to the Minister
for Enterprise and Innovation. We were fortunate to be able
to meet with her when we prepared this article for Forecasting
Europe.
15 UN Committee of Experts on Public Administration (CEPA)(2018): Principles of
effective governance for sustainable development.
14Forecasting Europe 2022 | Article
Recent ECA reports on sustainability areas such as agriculture, Another reason why audit institutions have become so
energy and fishing, and special editions of the ECA Journal on important to support sustainability could be that policymakers
the SDGs (2019), on Climate Change (2020), and Disasters are often seen to focus on the content of policies while
and Crisis Management (2021) are no coincidence. Ms. neglecting how they should be achieved, with which
Lindström: “In 2017 we looked at energy and climate change in a mechanisms and with whom16. Policy goals are sometimes
strategic way by producing a landscape review. So you could say in formulated without really thinking about how to govern
2017 we looked at energy and climate change for the first time in the implementation, and how to measure progress. In this
a holistic way and published a landscape review in this area. Our context, Ms. Lindström believes that auditors should also help
priorities are now in line with the political priorities of the EU, to develop criteria for policy validation and should stimulate
which are very much on sustainability and digitalisation. It was a increased transparency. In addition, policy goals and targets
logical step for us to also take up these themes at the ECA.” should be concrete enough to be ‘auditable’.
To conclude, it is clear that Supreme Audit Institutions have
found their place in the institutional sustainability ecosystem.
“Auditors are there to do audits, but also But according to Ms. Lindström, there is no reason for
to present recommendations for decision- complacency: “As ECA, and national Audit institutions, we need
makers. Both are important”. to permanently adapt to new challenges. We learn from each other
and continuously exchange views on new developments, for example
the Next Generation EU Programme, new working conditions
This change of course fits in a broader trend in politics and the or how to audit gender equality. Integrating the sustainability
economy towards thinking more long-term and preparing for dimension in our work sometimes makes it more difficult, but also
sustainability transitions. Ms. Lindström is pleased with the more interesting”.
attention the special editions of the ECA Journal on SDGs and
Climate have drawn. The ECA finds it important to set a good Any questions?
example, but it is certainly not alone. She refers to important Please contact Louis Meuleman via l.meuleman@berenschot.nl if
discussions that are taking place in the context of the European you have any questions about this article.
network of national SAIs, EUROSAI. Here recommendations
are developed on, for example, auditing SDG target 16.6 on
effective, accountable and inclusive institutions to achieve
sustainable development.
The ECA’s approach to accountability reflects contemporary
thinking on accountability as being both action and process.
According to Ms. Lindström, “Auditors are there to do audits,
but also to present recommendations for decision-makers. Both are
important”.
In addition, auditors must have a sense of what is going on in
societies. For example, according to the Eurobarometer, climate
action is the number one priority for EU citizens. They expect
policymakers to ensure that we achieve the goals for 2030 and
2050. Therefore, this is an important topic for audits at EU and
national level. It means that climate actions and commitments
should be more than only words. Ms. Lindström confirms:
“Auditors want to see what is really happening”.
16 See e.g. Meuleman, L., 2021. Public Administration and Governance for the SDGs:
Navigating between Change and Stability. Sustainability, 13(11), p.5914.
15Forecasting Europe 2022 | Article
NATO & transatlantic
innovation: upcoming
opportunities for Dutch
SMEs
Three take-aways for 2022: NATO understands the importance of innovation in the
1. NATO is working to operationalize two new initiatives to defence sector, David says : “Start-ups and SMEs in our Allies’
secure its technological edge: DIANA and the Innovation countries are not always aware of the applicability of their products
Fund. Both try to bridge the gap between the defence in the defence and security sector. Think of innovation in driverless
market and SMEs. technologies, which has advanced features like self-parking, avoid-
2. Dutch SMEs are well positioned to join DIANA and benefit ing traffic jams, and blind-spot monitoring. Applied to a military
from the NATO Innovation Fund. context, they could contribute to the safety of troops, surveillance
3. NATO and EU will continue to work together to strength- missions, or Improvised Explosive Device (IED) search-and-destroy
en their approach to technology and innovation. operations. And not just that, nowadays many of the security
threats facing NATO nations are hybrid or non-military in nature.
When you think of NATO, business opportunities may not One example is AI technology, which is increasingly used against us
be the first thing that spring to mind. That said, NATO has with malicious intent. We need innovative ideas from the private
been working to involve the private sector, especially SMEs, sector to be able to continue to respond to these types of challenges
in helping it respond to today’s security challenges. These to maintain our technological edge and keep our citizens secure.”
include rising tensions on the Poland-Belarus border, the
growing influence of China, and a proliferation of cyber,
hybrid and other asymmetric threats. For example, a new “Start-ups and SMEs in our Allies’ countries are
NATO Innovation Fund is expected to invest 1 billion euros not always aware of the applicability of their
with innovators across the Alliance working on emerging and products in the defence and security sector.
disruptive technologies. To learn more, Berenschot recently
met up with Mr. David van Weel, Assistant Secretary General
of the Emerging Security Challenges Division \t NATO HQ in This is why in spring 2021, NATO leaders agreed two new
Brussels. As a Dutch national and senior NATO official, David initiatives: a civil-military Defence Innovation Accelerator for
was able to tell us all about the developments in innovation we the North Atlantic (DIANA), and the NATO Innovation Fund.
can expect from NATO in 2022. According to David, both will offer unique opportunities for
the private sector, particularly for SMEs. “DIANA will help
bridge the gap between Allied defence and security innovation
“Nowadays many of the security threats facing by linking Allies – the users – with innovators, especially SMEs.
NATO nations are hybrid or non-military in It will introduce the defence market to SMEs and start-ups and
nature. One example is AI technology, which will be the contact point for innovators working in countries
is increasingly used against us with malicious across the Alliance alliance.
intent.”
16Forecasting Europe 2022 | Article
Participation in DIANA will offer unique access to NATO’s I was very happy to see that the Netherlands was amongst no less
deep scientific expertise, to operational endusers and potential than 17 Allies to sign up to set up the Fund and I look forward
access to 30 defence markets. Similarly, the Innovation Fund to building upon this positive relationship as both initiatives are
will provide early-stage and long-term strategic investment, in implemented.”
particular to dual-use and breakthrough ventures.”
Dutch businesses, especially SMEs, should feel encouraged
Did you know? to work with NATO. DIANA in particular offers unique
1. .. That NATO and the EU currently have 21 member coun- access to the defence markets of all 30 NATO Allies, making
tries in common? participation commercially interesting. The expectation is that
2. … That the EU and NATO work together in all sorts of Allies will want to buy innovative technologies and applications
areas, including countering hybrid threats, cyber defence, that DIANA and the Innovation Fund intend to support. On
maritime security, countering terrorism, and military that note, NATO has a particular interest in offering support
mobility? to sustainable and green applications, which, we think, will
3. … That EU-NATO Joint Declarations are currently the basis be relevant to the Dutch market. The Alliance has recently
for common action agreed by the two organisations? agreed its first-ever Climate Action and Security Agenda,
4. … That a new EU-NATO Joint Declaration is in the works which confirms that NATO will incorporate climate change
and will be released soon? consideration into its work on innovation. David emphasizes:
“Our interest in innovation and in green tech go hand in hand.
The goal is to have DIANA reach initial operating capability We are taking concrete action in response to the urgent threat
by 2023.The DIANA charter is still in the works. Berenschot of climate change and recognize the importance of innovating
has been informed that businesses will be invited to join a sustainably.”
network which will consist of test centres and accelerator sites
across the Alliance. DIANA will offer an accelerator program, Stronger NATO-EU cooperation needed
which among other things will give businesses the opportunity Much like NATO, the EU has been looking to bolster its
to define the applicability of their products to the defence defence capacity by working with the private sector. It has
industry. This process will be co-facilitated by military end- established initiatives such as the European Defence Fund
users. David confirms: “Allied innovators who consider their (EDF) -worth nearly 8 billion euros - to stimulate defence
applications to be dual use will be invited to test their application research and capability development. So it seems relevant to
with Allied end users. We look forward to working with brilliant explore how both organizations work together to maximize
minds and will support great ideas as much as we can.” The opportunities for innovation of shared interest.
Innovation Fund is a distinct, though not entirely separate,
initiative. Funded by interested NATO Allies, investment David emphasizes that NATO is not in competition with the
decisions will focus on seven key areas . Importantly, NATO’s
17
EU: “NATO and the EU share common values and face similar
ambition is to invest based on market needs and technological threats and challenges. Our security environment is becoming
edge, not in response to political or policy interests. increasingly complex and requires stronger NATO-EU cooperation.
We will continue to work hand in hand with EU colleagues to
Opportunities for Dutch SMEs strengthen our approach to new technologies and innovation.”
The Netherlands is 6th in a global ranking of most innovative David also highlighted the fact that several NATO Allies have
countries , and understands the critical role that SMEs play
18
set up their own innovation structures, and underscored
in boosting creative thought and innovation whilst creating NATO’s focus on complementarity: “There’s more than enough
solutions to complex societal challenges. It does not come to work on, both individually and together, and we encourage Allies
as a surprise then that the Netherlands is an enthusiastic to stimulate innovation in a national context. Only by taking on
supporter of new NATO innovation initiatives. “Some time ago this challenge in a way that encourages coherence can we ensure
we requested nations to communicate provisional offers to DIANA NATO’s technological edge and continue to provide for the security
and the Innovation Fund. of all our citizens.”
17 AI, data and computing, autonomy, quantum-enabled technologies, biotechno- Any questions?
logy and human enhancements, hypersonic technologies, space. https://www.
nato.int/cps/en/natohq/topics_184303.htm Please contact Romana Michelon via r.michelon@berenschot.nl if
18 https://www.weforum.org/agenda/2021/09/
worlds-most-innovative-countries-innovation/ you have any questions about this article.
17You can also read
